Healthcare stocks, often considered recession-proof, have lagged most other sectors of the market so far this year. While the S&P 500 index is up by more than 16% and flirting with a return to bull market status, the healthcare sector is down by more than 2.5%.
That underperformance is not true of all healthcare stocks, of course. Some — including Medtronic (NYSE: MDT), CRISPR Therapeutics (NASDAQ: CRSP), and Novo Nordisk (NYSE: NVO) — are defying the downdraft. Let’s take a closer look at these three stocks that are withstanding the bear market pressure.
Medtronic stock is up more than 4% so far this year. The medical device giant saw improved earnings thanks to the lessening of supply chain woes, some new product launches, and an increased pace of medical procedures (many of which were postponed during the COVID-19 pandemic).
In the first quarter of its fiscal 2024, which ended July 28, the company reported revenue of $7.7 billion, up 4.5%, year over year, and earnings per share (EPS) of $0.59, down from $0.70 in the same period last year. Perhaps the most encouraging point is that all of the company’s segments — diabetes, cardiovascular, medical-surgical, neuroscience, and other — saw sales increases near 5% or more.
Encouraged by the rising top-line results, the company raised its fiscal-year revenue guidance. It now predicts that organic revenue will climb by 4.5% and that EPS will land between $5.08 and $5.16, up from a previously forecast range of $5 to $5.10. However, that new EPS forecast is still below the fiscal 2023 result of $5.29. That’s partially due to the company’s purchase in May of wearable insulin patch maker EOFlow for $738 million.
Over the past 12 months, the company said it has seen 125 new clearances or approvals of its devices. It also has substantially improved its diabetes care offerings. In addition to the EOFlow acquisition, Medtronic earned Food and Drug Administration (FDA) approval in April for the MiniMed 780G with a Guardian 4 sensor, its next-generation continuous glucose monitor that has meal detection technology. The new device automatically adjusts the user’s sugar levels every five minutes.
Medtronic also pays a decent quarterly dividend, which it raised by 1.4% this year to $0.69 per share, the 46th consecutive year it has increased its dividend. The yield at the current share price is around 3.4%.
CRISPR Therapeutics’ stock is up by more than 23% so far this year. The reason for that rise has less to do with the company’s financials and a lot to do with what’s around the corner.
The gene-editing company is awaiting potential FDA approval for exa-cel, a CRISPR Cas 9-edited gene therapy that it is developing with Vertex Pharmaceuticals. The FDA accepted the companies’ Biologics License Applications for the therapy to treat severe sickle cell disease and transfusion-dependent beta-thalassemia. Patients with those blood diseases require regular transfusions, but in clinical trials, treatment with exa-cel has ended the subjects’ need for transfusions.
CRISPR will only get 40% of the profits for sales of exa-cel, but that could still be a big deal. Analytics firm Evaluate Pharma puts exa-cel’s potential 2028 sales at $1.7 billion, meaning $680 million in sales for CRISPR. And that’s just the start. CRISPR’s pipeline includes 18 other programs, including six that are already in clinical trials.
Exa-cel’s Prescription Drug User Fee Act (PDUFA) target action date as a sickle cell disease therapy is Dec. 8, while its PDUFA target date for transfusion-dependent beta-thalassemia is March 30, 2024.
If that was all CRISPR had in the works, that would be exciting enough, but the company is also progressing with CTX110, which is in trials as a treatment for B-cell cancers, and CTX130, which is being tested to treat T-cell lymphomas.
Perhaps the most promising program in its pipeline is VCTX211, a stem-cell-derived therapy for Type 1 diabetes that the company is collaborating on with Vertex. VCTX211 incorporates edits of cells that are undetectable to the immune system, helping prevent side effects, and it is designed to allow patients to produce their own insulin, which would be a paradigm shift in treating the disease. Type 1 diabetes affects roughly 1.6 million people in the U.S., according to the Centers for Disease Control and Prevention, so the potential profits for CRISPR from a successful therapy are huge.
CRISPR, unlike many clinical-stage biotech companies, has plenty of funds to develop its pipeline. As of the end of the second quarter, it had $1.84 billion in cash on the books. In the quarter, the company reported collaboration revenue of $70 million and a net loss of $77.7 million.
Novo Nordisk’s stock price is up 45% so far this year. The pharmaceutical giant, with a market cap of around $438 billion, is now Europe’s second-biggest company by market cap. (Earlier this month, it was briefly Europe’s biggest company.) Novo’s bottom line is getting fat because its portfolio includes Ozempic and Wegovy, drugs that are helping people get thin.
Ozempic and Wegovy are both based on the drug semaglutide, and each has potential applications beyond what they are already approved to treat (type 2 diabetes and obesity, respectively). The stock shot even higher in August when the company released the results of a study that said Wegovy had a demonstrable cardiovascular benefit. Earlier this week, a small report came out that showed that semaglutide helped Type 1 diabetics avoid the need for insulin injections.
And while Wegovy and Ozempic are garnering much of the attention, the company also has a large portfolio and 28 other programs in its drug-approval pipeline.
Through six months, the company reported revenue of 107.7 billion Dutch kroner (roughly $10 billion), up 30% year over year, thanks to growing sales in its diabetes and obesity care products. EPS grew by 44% year over year to 17.41 kroner (roughly $1.68).
The company said it expects its net profit to grow by between 27% and 33% in 2023.
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Jim Halley has positions in CRISPR Therapeutics. The Motley Fool has positions in and recommends CRISPR Therapeutics and Vertex Pharmaceuticals. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy.
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